Who has to use MTD for Income Tax
MTD for Income Tax (MTD ITSA) applies to sole traders and landlords whose qualifying income is over the threshold for their start year. The same rules apply to a taxi or private hire driver working alone or in a small firm.
The threshold is tested as more than the figure, so exactly 50,000 pounds is not over it. Qualifying income is the total income from self-employment and property before expenses, taken from the tax return you submitted in the previous tax year.
Add your self-employment income and any property income together before testing the threshold. Qualifying income of 20,000 pounds or less is an automatic permanent exemption.
| Qualifying income in | MTD ITSA starts |
|---|---|
| over 50,000 pounds in 2024-25 | 6 April 2026 |
| over 30,000 pounds in 2025-26 | 6 April 2027 |
| over 20,000 pounds in 2026-27 | 6 April 2028 |
All UK properties are treated as one UK property business, and all foreign properties as one foreign property business. Partnerships are not in scope yet, with no date published.
Fares, mileage and vehicle costs in your records
Your fares and any other self-employment income are business income. Under cash basis, which is the default method of accounting from 2024-25, you record income when the money is received and expenses when a bill is paid.
Business records for income and expenses must be kept for Self Assessment. For MTD ITSA, a digital record is a record of income or an expense created and stored in compatible software. Keep digital records for at least 5 years after the 31 January submission deadline for the tax year.
Mileage and vehicle costs are recorded as expenses in the same income and expense categories used for Self Assessment. The rates you can use are set out in the mileage rates guide.
- fares and other self-employment income, recorded when the money is received
- mileage for business journeys, kept as a digital record
- vehicle costs recorded in the Self Assessment expense categories
- the category totals that go into each quarterly update
Once a record has been sent to HMRC in a quarterly update it must not be moved by hand, either within the software or between products. That means no writing it out in another cell, and no cut and paste or copy and paste. HMRC's examples of a digital link include linked cells in spreadsheets, emailing a spreadsheet containing digital records so it can be imported, transferring records on a portable device such as a memory stick, XML and CSV import and export, and an automated transfer using an API.
What each quarterly update contains
You send four quarterly updates a year, built from your digital records. Each one is a set of totals by income and expense category, cumulative from 6 April. It is a summary, not a tax return.
HMRC receives the category totals, not the individual transactions. The categories are the same as Self Assessment.
You must still send an update for a period with no income and no expenses. You can send from the end of the period up to the deadline, or up to 10 days before the period ends if you expect no further transactions.
There are two update period types: standard, aligned to the tax year from 6 April to 5 April, and calendar, from 1 April to 31 March. The deadlines are the same for both. The accounting period cannot be changed after the first quarterly update has been sent.
You can send updates more often than quarterly, but each must cover the full update period. After each update you can see an estimate of your tax bill in your software or in HMRC online services.
Quarterly update and tax return deadlines
Each update covers a period ending on the 5th of the month and is due by the 7th of the following month.
| Update period ends | Deadline |
|---|---|
| 5 July | 7 August |
| 5 October | 7 November |
| 5 January | 7 February |
| 5 April | 7 May |
The tax return is submitted after the tax year ends, and the tax is paid by 31 January.
Penalties and points
For 2026-27 there are no penalty points for missing a quarterly update deadline. Points still apply to the tax return deadline, and digital records and quarterly updates are still required.
From tax years after 2026-27 you get one penalty point per missed submission deadline, whether that is a quarterly update or the tax return. The threshold is 4 points, then a 200 pound penalty, then a further 200 pound penalty each time another submission deadline is missed.
Only one point is given per deadline, even if you have several businesses and several late updates. VAT penalty points are counted separately from MTD ITSA points.
Below the threshold, each point is removed automatically 24 months after the missed deadline. At the threshold, points are not removed automatically: you need 12 months of on-time quarterly updates and tax returns, plus sending outstanding updates and returns for the previous 24 months.
Late payment penalties are not points based and apply to each late payment, but not to payments on account. Late payment interest runs from the first day the payment is late until it is paid in full.
Signing up and getting software ready
You must be registered for Self Assessment and have submitted a tax return in the last 2 years. If you have more than one income source, you sign up each one.
From September 2026 HMRC signs up anyone who needs it for 2026-27 and has not signed themselves up. It happens in stages, using only the information HMRC already holds. HMRC's sign-up confirmation arrives in HMRC online services or by post. An identification check may be required.
You still submit the Self Assessment tax return for the tax year before you start using MTD ITSA.
For MTD ITSA, compatible software must create and store digital records, work with your chosen accounting period, and send the quarterly updates. An all-in-one product also submits the tax return.
You authorise the software so it connects to HMRC, and repeat that every 18 months without repeating the identity check. HMRC does not provide software, and does not approve, endorse or recommend any product.